HAMBURG, Germany - Porsche SE is in exclusive talks to sell a stake to the Gulf state of Qatar, in a deal that could cut the German automotive holding's debt and strengthen its position for a merger with Volkswagen.

The move could pave the way for the Porsche and Piech families to give up full control over their business and is further evidence of the increasing role of Arab states in an auto industry founded by the German Carl Benz, when he invented the modern gasoline-powered car in 1885.

Should Qatar buy a stake, the proceeds could help repair Porsche SE's tattered balance sheet and bolster its bargaining position when arguing for a merger of equals with financially solid Volkswagen.

There are only talks with Qatar now, a Porsche spokesman said.

A person close to Porsche said that the company was in talks with investment fund Qatar Investment Authority (QIA) to sell a stake in its automobile holding via a capital increase of unlisted common shares or by divesting its options for Volkswagen shares.

QIA and the Qatari government have declined comment.

Porsche shares eased 0.9 percent to 46.57 euros by 1310 GMT (9:10 a.m. EDT) while Volkswagen shares rose 1.6 percent to 251.80 euros.

FAMILY DEALERSHIP

So far, investors could only buy exposure to Porsche's iconic sports car brand through the purchase of preferred shares that gave them no say in the company, which has a majority voting stake in Volkswagen.

Building up the VW stake saddled Porsche with 9 billion euros of net debt.

The two controlling families also own Salzburg-based Porsche Holding, Europe's largest dealership group that owns the lucrative distribution rights to sell VW group cars in Austria and Eastern Europe.

BHF Bank analyst Aleksej Wunrau suggested on Tuesday that the families may want to consider including Porsche Holding in a merger with Porsche SE and Volkswagen, where VW ordinary stock would reflect his estimated fair value of 80 euros per share.

Lower Saxony would fail to achieve a blocking minority, Porsche would economise on costs tied to a further rolling-over of its forward contracts in VW, and legal issues with VW's preferred shareholders who might appeal to the enormous spread between the commons and the preferred shares in the appraisal would be evaded, he wrote in a research note.

Thanks to VW statutes and a federal law that protects its influence, Lower Saxony can veto key decisions even though it owns just 20 percent of the company's common shares.

The Financial Times had reported that QIA could take a stake of up to 25 percent in Porsche's holding company in a deal involving a capital increase of up to 4.5 billion euros ($6.25 billion).

A deal could be announced within weeks, the paper had said.

In March, Abu Dhabi's IPIC sovereign wealth fund bought a 9.1 percent stake in Daimler for almost 2 billion euros via its exchange-listed vehicle Aabar, making it the largest shareholder ahead of fellow Gulf state Kuwait.

(Additional reporting by Christiaan Hetzner; Editing by Erica Billingham)

($1=.7203 Euro)

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